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SBH HO balance sheet analysis for the year ended March 31,2003

The capital remained the same at 1725.00 lakh . the reserved and surplus have increased from 98116.29 lakh to 123369.46 lakh showing an increase of 25253.17 lakh constituting an increase of 25.74%.
Main additions were in investment fluctuation reserve of 14000.00 lakh raising the reserve from 10000.00 lakh to 24000.00 lakh and statutory reserved which added 9041.89 lakh raising the balance from 28718.30 lakh to 37760.19 lakh. There was a reduction of 2940.42 lakh transferred to other liabilities which represented the provision for leave encashment.

Deposits have grown from 1740275.48 lakh as at the end of March 31,2002 to 2059893.53 lakh as on March 31,2003 showing an increase of 319618.05 lakh representing 18.37%.
The demand deposits from banks increased from 34680.29 lakh to 42531.09 lakh by 22.64%. The demand deposits from others increased from 248414.04 lakh to 255187.56 lakh by 2.7% only. SB deposits increased from 319422.44 to 393969.29 lakh by 23.34% which was very healthy growth and went to decrease the cost of funds. The low cost deposits have gone up from 602516.77 lakh to 691687.94 lakh by 14.80%. To be prudent the investment should have been held around 15+2%[ low cost deposits growth plus fall in CD ratio] i.e. 17% while it went upto above 25%. The term deposits from banks have fallen from 39655.86 lakh to 26373.65 lakh by 33.49%. and the term deposits from others have increased from 1098102.85 lakh to 1341831.94 lakh i.e.22.19%. the total term deposits have increased from 1137758.71 lakh to 1368205.59 lakh i.e.20.25%

Borrowings have increased from 7790.97 lakh as on March 31,2002 to 41642.15 lakh as on March 31,2003 showing an increase of 33851.18 lakh representing 434.49% or a four and a half fold increase.
The borrowings from RBI were nil. While borrowings from other banks were reduced drastically from 804.09 lakh to 34.27 lakh i.e.769.82 lakh or 95.74%. while the borrowings from other institutions and agencies represented a fall from 6986.88 lakh to 4569.58 lakh i.e.2417.30 lakh or 34.60%. the borrowings from overseas banks had gone up from zero to 37038.30 lakh which accounted for the increase in borrowings in general. The reasons for and utilisation of the same needs to be probed.
Other liabilities and provisions had gone up from 364172.02 lakh to 386524.24 lakh showing an increase of 22352.22 lakh representing 6.14% hike.
Bills payable went up marginally from 136000.50 lakh to 140915.10 lakh [+3.6%] and interest accrued had gone up from 120107.71 lakh to 134068.87 lakh [+11.62%]. ’Others’ under other liabilities included subordinated debt or tier II capital which remained at 27500.00 lakh. other items excluding the subordinated debt rose from 80563.81 lakh to 84040.27 lakh [+4.3%]
Cash and balances with RBI went up from 131234.51 lakh to 182711.91 lakh showing an increase in idle cash by 51447.40 lakh i.e. 39.23%
Cash in hand had fallen from 7296.43 lakh to 6482.91 lakh [-11.15%] while the balances in RBI in current account went up substantially from 123938.08 to 176229.00 lakh [+42.19%]. Balances with RBI in other accounts was nil.

While balances with Banks and money at call and sort notice fell by half from 106896.07 lakh to 58127.73 lakh i.e.45.62%
Balances held with banks in current accounts doubled from 3276.80 lakh to 6393.79 lakh [+90.78%]. Money at call and short notice fell drastically from 20700.00 to 2750.00 lakh [-86.71%]. Money held in current accounts with banks outside India fell from 82919.27 lakh to 48983.94 lakh [-40.92%] but was still substantial in absolute terms. Reasons for holding such huge amounts in cash abroad in current accounts needs to be examined.
Investments have gone up substantially from 982789.24 lakh to 1251866.56 lakh by 269077.32 lakh i.e.27.38%
The gross investments grew by a healthy 27.4% while the depre4ciation grew even faster by 32.28% from 4825.28 lakh to 6382.94 lakh which shows deterioration in the portfolio of investment. There was a growth of 22.01% in government securities and fall of –7.35% in the investments made in other approved securities. Investments in shares had shown a growth of 5.75% on a year end to year end basis . The tendency was to increase exposure to investment in equity shares which needs to be examined for trends during the year. The bank had shown a risk-taking attitude when it increased its exposure to equity and reduction in investment in debentures and bonds or debt instruments which fell by –9.55%. the investment in subsidiaries remained the same at 632.53 lakh . the major increase was in the investments made in IVP,KVP,UTI, and MFs which showed an increase of 198.48% from 47840.11 lakh to 142791.47 lakh. The MF schemes along with the NAV need to be examined as also the value of UTI shares and units as well as their NAV.
Advances of the bank has gone up from 842258.50 lakh to 966259.98 lakh by 124001.48 lakh i.e.14.72%
Bills purchased and discounted grew on par with the total advances at 14.79% from 66779.34 lakh to 76654.91 lakh . The cash credits OD and demand loans almost stagnated with the growth being around 3.21% from 518829.12 lakh to 535499.54 lakh .there was robust growth in term loans by 37.97% from 256650.04 lakh to 354105.53 lakh . this however is a mixed trend as the greater proportion of term loans has ALM implications as funds are locked up for longer periods and need to be examined with reference to time buckets of funds availability.
Security wise analysis revealed that the advances secured by tangible assets which are traditional secured advances stagnated with marginal growth at 5.25% from 744011.55 lakh to 783065.00 lakh. The bank has shown distinct preference for Govt guaranteed accounts with the same doubling during the year from 34518.06 lakh to 73570.55 lakh [+113.13%]. The other area of preferred exposure for the bank was in the unsecured loans category which increased by +72.02 % from 63728.89 lakh to 109624.43 lakh. With the public sector receding as a viable player in the economy dominated by privatization and free market orientation and increase in the number of failures in the sector coupled with proven inefficiency and corruption and leakages of revenue due to the same and possibility of Govt guarantee being honoured proved to be remote by experience coupled with the rise in unsecured advances the bank has chosen to enter high risk areas in lending. The priority sector advances fell and stood at 32.54% from 34.41% falling short of the required 40% norm of the GOI. The shortfall may explain the reason for the penchant for Govt guaranteed accounts by the bank. A further analysis may yield why it could not increase its finance to agriculture and SSI units which abound in its area of operation.loans to public sector on the other hand stagnated at 196151.72 lakh indicating growth of only 1.32% over the year. It needs to be investigagted as to how the govt guaranteed accounts grew by 113% while the loans to public sector stagnated. The bank also concentrated in lending to other banks which grw from 4193.58 lakh to 17067.97 lakh which shows a growth of 407%. The loans to other sectors showed a healthy growth of 23.7% from 354625.74 lakh to 438657.99 lakh . the total advances grew by 14.72%.

The credit deposit ratio has fallen from 48.39% in 2001-02 to 46.91%

The reasons for borrowings having to go up by four and half times while the credit deployment has in fact gone down needs to be investigated. Prima facie it can be concluded that the bank borrowed to keep money idle and to make investments. As it is not possible to borrow to invest if the investments are liquid then the conclusion can be modified to read as investments were not sufficiently liquid forcing the bank to borrow to invest for compulsory purposes. other explanation could be that the bank has fully availed refinance facilities for advances and used its deposits for making investments during the year.
There was a marginal increase in fixed assets from 10266.02 lakh to 11531.40 lakh by 1265.38 lakh i.e.12.33%
Premises were added to the tune of 59.59 lakh during the year and depreciation including lease hold rents written off during the year stood at 178.57 lakh. FFF were added to the extent of 3800.34 lakh presumably die to computerization efforts and remodeling. FFF worth 197.96 lakh was deducted indicating sale at scrap value which needs to be probed into for procedures adopted and the loss if any accrued to the bank in the transaction. There were no additions to the leased assets which remained at the earlier level and depreciation of 410.53 lakh was provided including 51.91 lakh written off for the current year.
Other assets have gone up from 138635.42 lakh to 142656.80 lakh by 4021.38 lakh i.e.2.9%.
Other assets included interoffice adjustments [net] stood at 39177.61 lakh ; interest accrued was at 51728.38 lakh ;tax paid in advance was at 28468.35 lakh and stationery and stamps were at 557.85 lakh ; deferred tax asset stood at 3054.00 lakh which was included in others of 22724.61 lakh .

Contingent liabilities have shown a robust growth from 893487.01 lakh to 1057555.98 lakh by 164068.97 i.e.18.36%
Claims against the bank not acknowledged as debt grew from 7287.84 lakh to 8357.92 lakh by 14.68%. the liability for partly paid investments stagnated at 19.88 lakh . It needs to be seen as to which are these investments whose second call has not been made. The liability on account of outstanding forward foreign exchange contracts rose by 20.3% from 689859.24 lakh to 829884.52 lakh . it needs to be examined as to how the bank itself covered its liability in this regard to exchange risk. Inland Guarantees rose by 6.9% while the foreign bank guarantees almost doubled from 78722.70 lakh to 12444.73 lakh a growth of 94.86%. other acceptances rose by 9.77% and other contingent liabilities rose by 15.98%. the break up and the liability needs to be examined in detail.
Business from bills had gone down substantially as shown by the fall in bills for collection from 295690.16 lakh to 90013.90 lakh by 205676.26 lakh i.e.69.56%.

profit and loss account:
Though the interest income increased by 7.77% the other income rose by a hefty 26.85% indicating good emphasis on miscellaneous income/ fee based income other than interest income and diversified services offered by the bank. Growth in expenses were within range acceptable of below 9% except the provision and contingencies rose by a hefty 22.21%. the net profit grew by a robust 33.07% from 22648.73 lakh 30139.60 lakh. Investment fluctuation reserve grew by 114 %;dividend increased by 150% and transfers to statutory reserve went up by 33% among the appropriations made from the prfit and loss account. Transfer to other reserved fell steeply by 75% form 20480.81 lakh to 5151.70 lakh break up for which needs to be investigated.